Nikkei drops, pulls back from 52-month highs; exporters weigh

Thu Feb 21, 2013 3:06am GMT

* Construction equipment makers down on weak Caterpillar
sales
    * GS Yuasa jumps on hopes Dreamliner battery failure issue
will be resolved
    * Focus on U.S. summit, BOJ gov nomination
    * Pension fund report on investment in Japan stocks curb
losses

    By Ayai Tomisawa
    TOKYO, Feb 21 (Reuters) - The Nikkei average fell on
Thursday as exporters and construction equipment makers dropped,
tugging the market  slightly below a 52-month high tapped the
previous day.
    By the midday break, the Nikkei dropped 0.8 percent
to 11,376.28, tracking a weaker finish on Wall Street overnight.
On Wednesday, the Nikkei rose as high as 11,510.52, also the
highest level since late September 2008.
    Hiroichi Nishi, an assistant general manager at SMBC Nikko 
Securities, said there were more than 40,000 call option 
orders at the 11,500 mark for the past two days, suggesting that
the index faces some resistance from the seller side close to
that level.
    The broader Topix dropped 0.6 percent to 967.81.
    U.S. stocks fell the most in three months Wednesday after
minutes from the Federal Reserve's most recent meeting suggested
the central bank may slow or stop buying bonds sooner than
expected.
    Construction equipment makers were weak. Komatsu Ltd
 shed 4.1 percent, the second-biggest percentage loss
leader on the board, while Hitachi Construction Machinery Co Ltd
 dropped 3.0 percent after Caterpillar Inc's 
dealers reported slowing sales for the three-month period ended
in January.
    Exporters were weak, with Panasonic Corp dropping
1.6 percent, Toshiba Corp shedding 1.7 percent and
Fanuc Corp falling 2.7 percent.
    GS Yuasa Corp, which makes the batteries for
Dreamliner, jumped 6.4 percent after a source told Reuters that
a senior Boeing Co executive will meet with the head of
the U.S. Federal Aviation Administration on Friday and present a
series of measures aimed at preventing battery failures that
grounded its 787 Dreamliner fleet for five weeks.
 
    A second source familiar with Boeing's plans told Reuters
that the company also planned to increase the space between the
cells in the lithium-ion batteries made by Japan's GS Yuasa as a
potential fix..
    
    PENSION FUND ALLOCATION CHANGE SUPPORT SENTIMENT  
    Market players said that while the yen weakness has paused,
some investors are buying shares on the dips based on individual
news.
   Sentiment is also somewhat supported by a Nikkei report that
Japan's biggest pension fund is considering increasing its
exposure to Japanese stocks, they said.
    The Government Pension Investment Fund, which oversees more
than 100 trillion yen in retirement savings, will consider
raising its exposure to domestic stocks in its first portfolio
reallocation in years, the Nikkei said.
     "This (Nikkei) report is suggesting that we will see
further stock rises in the future, so the Japanese market
probably won't face a significant sell-off even after it rose
sharply," said Fujio Ando, an analyst at Chibagin Securities.
    The Nikkei has gained about 30 percent and the yen has
declined some 15 percent against the dollar since mid-November 
driven by bold fiscal stimulus and monetary easing policies
pursued by Prime Minister Shinzo Abe's new government to
reignite the economy.
    Still, for this week, some analysts said the Nikkei is
expected to trade in a fairly tight range.
    "The Nikkei pierced the psychological resistance level of
11,500, but trading volume has stayed low as investors want to
stay on the sidelines before major events," said Yutaka Miura, a
senior technical analyst at Mizuho Securities.
    Miura said investors were cautiously awaiting the outcome of
a meeting in Washington on Friday at which Prime Minister Shinzo
Abe and U.S. President Barack Obama are expected to discuss a
range of issues including economic and trade matters.
    Additionally, the market may remain cautious before the
nomination of a new BOJ governor, Miura said.
     The government has delayed nominating a governor by a week,
fanning talk of friction between the prime minister and the
finance minister over who should run the central bank and take
aggressive action to revive the economy.